AT&T; Reaches Out and Trips the Tech Sector
An earnings warning from AT&T; helped spark fresh selling by technology stock investors on Tuesday, leaving the Nasdaq composite index with its first loss in four sessions.
The Nasdaq index slumped 172.63 points, or 4.4%, to 3,785.45, taking back a chunk of that market’s 19% rebound between April 17 and Monday.
Losers topped winners by 26 to 15 on Nasdaq, and by 17 to 13 on the New York Stock Exchange, where the NYSE composite slid 0.7%.
The Dow Jones industrials, of which AT&T; is a member, fell 80.66 points, or 0.8%, to 10,731.12.
But the selling lacked any urgency--just as the buying in recent weeks has lacked urgency, analysts say. Nasdaq recorded one of its lowest-volume sessions of the year, as 1.4 billion shares changed hands.
Still, traders were disappointed that the recent rebound in tech shares reversed. The Nasdaq index traded in a narrow range for much of the day, then fell hard in the final two hours, closing at the low for the day.
AT&T; hurt sentiment, tumbling $7.06 to $41.94 after reporting weaker-than-expected first-quarter sales and earnings and cutting its earnings outlook for the full year.
That dragged other long-distance stocks lower, including MCI WorldCom, down $3 to $42.94, and GTE, down $4.31 to $64.69.
AT&T; Wireless, the company’s recently issued tracking stock, slumped $3 to $32.25.
Tech and telecom stocks in general also gave ground. JDS Uniphase slid $9.69 to $94.56, Intermedia Communications lost $4.38 to $40.38, Intel slid $5.94 to $121.19 and Cisco Systems lost $3.44 to $68.
Microsoft also weighed on the tech sector, losing $3.56 to $69.88 on continued worries over the government’s proposal to split the company in two.
Mary Meeker, an influential technology stock analyst at Morgan Stanley Dean Witter, said she believes Microsoft stock is fairly valued in the $60s. But Meeker said in a research note that she believes the proposal to break the company in two to satisfy antitrust concerns is an excessive punishment.
The broad market was under pressure amid fears that an economic report coming Thursday--on first-quarter productivity--will provide more evidence that the economy’s low-inflation, high-productivity era of recent years is coming to an end.
The 30-year Treasury bond yield rose to 6.01% from 5.99% on Monday, the first close above 6% since mid-March.
Many bond investors fear that more bad news on the economy will give the Federal Reserve a reason to boost its key short-term rate by one-half percentage point on May 16. “The Fed obviously has more work to do,” said Michael Moran, chief economist at Daiwa Securities America Inc.
Among Tuesday’s highlights:
* Many Internet-related shares gave back some of their recent gains. EBay slid $12.25 to $143.38, Yahoo lost $8.31 to $122.56 and Juniper Networks fell $21.06 to $197.88.
But chip maker Broadcom rose $7.75 to $182 on a new-product announcement.
* Baby Bell stocks fell with AT&T.; BellSouth lost $2 to $46.81 and SBC Communications slid $2.25 to $42.38.
* Computer networker Novell plunged to $13 in after-hours trading, after closing on Nasdaq at $17.56, as the company warned of lower-than-expected earnings.
* Some investors moved back into “old-economy” stocks. Energy-related shares jumped as crude oil prices and gasoline futures surged on renewed supply concerns.
Chevron surged $3 to $89.31, Transocean Sedco gained $2 to $49.31 and Enron jumped $3.69 to $76.
* Gold shares also rose as bullion prices perked up. Barrick gained $1.63 to $18.63 and Newmont Mining surged $2.94 to $26.38.
* Drug stocks rebounded. Merck rose $1.69 to $69.25 and Pfizer added $1.13 to $42.94.
Market Roundup, C9-C10
